John Faustman, EVP BMS Reinsurance Property & Casualty Team, contributed to the Business Insurance Magazine debate regarding, one of the hottest topics of the PCI conference, the potential impact of the revised RMS model.

John highlighted the need for clients to be offered a variety of analytical options and models. He said: “they need to look at exposure aggregations, not just modeled possibilities.”

EVP BMS Property & Casualty Team, Phil Campbell, featured in Day 1 of The Review PCI Show Daily discussing how the future for the market is one potentially filled with ‘multiple minefields’. He reflected on how re/insurers will have to focus on being increasingly efficient if they are to weather the challenges of the current economic crisis.

Stefano Nicolini, SVP BMS Retro, featured in the Reactions PCI Reporter discussing the industry loss warranty (ILW) business and the 1/1 renewals.

Stefano reported that the need for extra retrocessional cover has had a huge impact on the demand for ILW and overall will push up retro prices at January 2012. This alongside fears of the potential impact on pricing of the new RMS 11 catastrophe model and the Japanese earthquake has seen the popularity for buying ILW increase exponentially.

Jonathan discussed how the ‘loss reporting creep’ that is experienced after larger catastrophes, such as the Japanese earthquake, make it difficult to finalise pricing. When full loss figures are not reported until after the renewal season is completed, it can cause numerous problems and is likely to cause global reinsurance premiums to rise in 2012.

Jonathan Morris, managing director of the BMS Retro team was interviewed by Insurance Day’s Chris Munro before heading off to the Baden Baden Conference.

Jonathan talked about how retrocessional reinsurers, in light of the catastrophe-heavy first quarter of 2011, will need to make clients understand that prices will need to increase to cover the losses. Although he advised that these increases should be spread gradually over a number of renewal seasons to ensure they do not force companies out of the market. Alongside these increases, Jonathan also referred to the considerable talk in the market about other available capacity to complete programmes from both traditional and non-traditional sources.

I have been going to Baden Baden for the last four years and although relatively internationally focused, it has become an increasing important conference where after the early discussions of Monte Carlo Rendez-Vous; we finally get down to business and focus on client/contract specific topics. This concentration of market players in one location all with a focus on the renewal season ahead, to my mind makes Baden the real beginning of the new season.

BMS Re will be represented this year by myself and Georgina Glander. We will be hosting meetings between our clients and their markets. We also plan to see other existing and potential retro markets form Europe, Bermuda, Barbados and Scandinavia. These markets include hedge funds as well as traditional reinsurance.

I think the key discussions at Baden Baden will be focused around the poor results relating to the sizeable losses experienced in New Zealand and Japan earlier in the year and how these losses will impact throughout the market and potentially drive change. It is obvious that it will take more than one year to recoup such exceptional losses and to get clients’ portfolios back into the black.

Capacity is always a hot topic and this year talk will be around whether traditional or less-traditional forms of capacity emerging from capital-based market will be used to complete programs. These new players in the retro scene are good for clients, as a buyer they need a mix of traditional and capital markets to try to smooth out any volatility in pricing each year. There is an increase in choice for clients overall, be it Insurance linked securities (ILS), Industry Loss Warranties (ILW), traditional cover or capital markets.

In terms of the retrocessional market, it is early days regarding 1/1 renewals, but Baden will set the scene for the latter weeks in December when the decisions are made. Our biggest competitors are ‘net retentions’ and deductibles. For me, if retro reinsurance is too expensive; people will buy less of it and stay out of the marketplace for longer, which is not what we want.

I foresee loss reporting from cedants as growing concern for reinsurers and their retro reinsurers. Earthquake losses, in particular, take a long time to gather reliable data from, so both the Japanese earthquake and New Zealand have taken a long time to get accurate loss estimates to base any sort of pricing around.

Overall it is definitely going to be a tough renewal season for all concerned and I believe the above themes will dominate the industry conferences for some time to come.

BMS featured in the Insurance Insider, in a review of our 2010 Report & Accounts. BMS ranked second in the magazine’s analysis of the revenue of the top independent brokers 2010, highlighting that regardless of the £3million investment in business and new hires, the group is growing and is already expecting revenues for 2012 to grow by 10% at the very least.

Carl Beardmore’s comments on the rationale and overall need for varying sizes of broking companies were included in Paul J Davies’ article: ‘Brokers seek to diversify and offset hard times’. Carl commented on how people prefer to spread their exposures and not ‘put all their eggs in one basket’. The general feedback that the BMS CEO has been receiving in the market is that clients welcome competition and that bigger is not necessarily better for them or the market itself. With increased competition the clients are the beneficiaries, with offerings that are honed to meet their needs and ensuring brokers give them the best possible service for their money.

iPad Project:

Sharlene Goff focused her article on the Lloyd’s iPad project and she noted how the technology was a tool to enhance the tradition of face-to-face broking within Lloyd’s, rather than the death knoll to tradition that some fear it might be. BMS’ innovative role in the first-ever fully-electronic placement at Lloyd’s, in January 2011, was highlighted as an example of how far the industry has come in its relationship with technology. Steve Knight, Director – BMS Direct & Facultative, commented in the article that electronic placing makes the whole process of placing a contract ‘exponentially more efficient.’

There were some stimulating panel discussions at this conference, the highlight being the CEO panel, which had a great line up. I particularly enjoyed all the discussion around “when will the market turn.”

One panel member described the market as a “not yet” market, that there have been pockets of change but nothing has as “yet” had enough impact. Another panel member cautioned us about blaming others/other industries for our results.

Of obvious interest to me, as EVP of BMS’ Specialty Casualty team, was when one panel member expanded on the casualty market commenting that the casualty business looks surprising good – in spite of the depressed rate levels.

I also enjoyed the CFO panel where one debate focused on the benefits of reinsurance and whether or not it is felt the capital markets sector will displace the demand for reinsurance. One panel member was quick to comment that reinsurance does more than provide capital for their company, that it helps to de-risk as they build a diversified book and they value the reinsurance partnership with key players in the industry.

The keynote speaker raised some valid discussion points when he pushed thinking around the question; “Are we driving people/companies out of the market?” based upon the increased retentions. Furthermore, he talked about growth opportunities in this challenging market and how the real money is in the “specialties” (Practice Groups by Industry/Product). He concluded with the fact that opportunity lies in differentiated talent, that the focus of companies, needs to be on obtaining the best talent – then lead, motivate and retain them.

Carl Beardmore featured in The Review special report looking at the current broking market.

Price Waterhouse Coopers (PwC) provided a critical assessment of the current broking market and Stuart Collins spent time talking to the major players, including BMS, for the report.

PwC found that it is the growth prospects for reinsurance brokers that are falling away at this time of heightened pressure to sustain revenues and profit margins, against a backdrop of a slow global economy and a flat insurance market.

PwC concluded that in times such as these, there is a need and trend towards specialist, less-expensive and extra value-added reinsurance broking. Carl acknowledged the excellent work of the ‘big three’ over the last decade, however big has come to mean ‘inflexible’ and clients now demand options and flexible, tailored solutions that the medium-sized broker is better able to fulfil. Carl emphasised that there is the room to grow in the market and in terms of strategy: “BMS is looking to consolidate its position in the US – which remains our core market.” Alongside this, he reiterated that when BMS does become a ‘global player’, it will always be the individual solutions that are key.